Thursday, January 19, 2006

Always more regulation...always

Wal-Mart is a popular scapegoat for everything people feel is wrong with corporate America. Health care coverage for employees is as hot a topic as any, and Wal-Mart takes its fair share of abuse on this topic. Enter the Fair Share Health Care Act, West Virginia's latest stab at retaining the bottom position on the Fraser Institute'sEconomic Freedom Index. A general run down of the situation as it pertains to West Virginia is here. (If nothing else, the Mountain state has proved its bills are as lyrical in name as any.)

The bill mandates that all companies in West Virginia that employ 10,000 or more employees spend at least 8 percent of their wages on health care costs. Given that only Wal-Mart would be subject to the legislation, this isn't a bill about health care as much as it's another competitive obstacle that Wal-Mart has to hurdle to keep their company moving forward. After all, if this were about health care, why not have every company be required provide some degree of health insurance? What makes Wal-Mart employees particularly susceptible compared to, say, supermarket employees?

Of course, even if the bill were to pass and Wal-Mart became subject to its provisions, there's any of a number of actions it could take to side step the blow. Wal-Mart currently employs a little more than 12,000 West Virginians; they could simply cut back operations until their employment fell below the 10,000 mark. Who would suffer more-- Wal-Mart, or the community which Wal-Mart served with lower prices and employment opportunities? Without scaling back operations, Wal-Mart could simply reduce cumulative wages by the amount they would be required to pay in health-care. Nothing would change with respect to the bottom line for the company, nor would the employees be receiving less in value for their labor-- but they would be limited in their choices in how to spend their own money. As such, every employee would be weakly worse off by the legislation.

As is so often the case with legislation, the intended targets of new laws are often not the ones actually effected. Instead of hampering Wal-Mart's ability to compete by increasing their costs relative to their competitors, the Fair Share Health Care Act threatens the communities and the employees of the retail giant.

It took two volleys from the Maryland State Legislature to get their Fair Share Health Care Act passed-- one to get it to the governor's desk, and another to override his veto and turn it into law. As a West Virginia resident, here's to hoping that our legislature isn't as...persistent.